Can I safely delete contents of Xcode Derived data folder?

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Yes, you can delete all files from DerivedData sub-folder (Not DerivedData Folder) directly.

That will not affect your project work. Contents of DerivedData folder is generated during the build time and you can delete them if you want. It’s not an issue.

The contents of DerivedData will be recreated when you build your projects again.

Xcode8+ Update

From the Xcode8 that removed project option from the window tab so you can still use first way:

Xcode -> Preferences -> location -> click on small arrow button as i explain in my first answer.

Xcode7.3 Update
For remove particular project’s DeriveData you just need to follow the following steps:

Go to Window -> Project:

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You can find the list of project and you can either go the DerivedData Folder or you can direct delete individual Project’s DerivedData

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I am not working on Xcode5 but in 4.6.3 you can find DerivedData folder as found in the below image:

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After clicking on Preferences..

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You get this window

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